Shilkin v Taylor
[2011] WASCA 255
•18 NOVEMBER 2011
SHILKIN -v- TAYLOR [2011] WASCA 255
| SUPREME COURT OF WESTERN AUSTRALIA | Citation No: | [2011] WASCA 255 | |
| THE COURT OF APPEAL (WA) | |||
| Case No: | CACV:11/2011 | 19 OCTOBER 2011 | |
| Coram: | PULLIN JA BUSS JA NEWNES JA | 18/11/11 | |
| 22 | Judgment Part: | 1 of 1 | |
| Result: | Appeal dismissed | ||
| B | |||
| PDF Version |
| Parties: | STEVEN ANDREW SHILKIN COLIN HOWARD TAYLOR JENNIFER ELLEN BAKER HOMESTEAD FURNITURE NOMINEES PTY LTD ANNE MARGARET SHILKIN |
Catchwords: | Practice and procedure Application by appellant to set aside default judgment Magistrates Court (Civil Proceedings) Act 2004 (WA), s 18(2), s 19(3) Principles to be applied Whether defence has 'reasonable prospect of succeeding' Admission of new evidence on appeal Relevant principles Magistrates Court (Civil Proceedings) Act, s 42(3)(c), s 42(4) Real property Lease Default by appellant/lessee in payment of rental Appellant contended first respondents/lessors not entitled to rely on default because caused by first respondents' conduct Alleged that first respondents lured nearby businesses to move to new premises causing loss of custom to appellant's business and inability to pay rental No wrongful act by first respondents alleged No evidence first respondents caused nearby businesses to move No derogation from grant of lease |
Legislation: | Magistrates Court (Civil Proceedings) Act 2004 (WA), s 18(2), s 19(3), s 42(3)(c), s 42(4) |
Case References: | Agar v Hyde [2000] HCA 41; (2000) 201 CLR 552 Aldin v Latimer Clark, Muirhead & Co [1894] 2 Ch 437 Batistatos v Roads and Traffic Authority (NSW) [2006] HCA 27; (2006) 226 CLR 256 Birmingham, Dudley & District Banking Co v Ross (1888) 38 Ch D 295 British Leyland Motor Corporation Ltd v Armstrong Patents Co Ltd [1986] AC 577 Browne v Flower [1911] 1 Ch 219 Carpet Fashion Pty Ltd v Forma Holdings Pty Ltd [2003] NSWSC 460 CDJ v VAJ [1998] HCA 67; (1998) 197 CLR 172 Dey v Victorian Railways Commissioners [1949] HCA 1; (1949) 78 CLR 62 Fancourt v Mercantile Credits Ltd [1983] HCA 25; (1983) 154 CLR 87 Field v Commissioner for Railways for New South Wales [1957] HCA 92; (1957) 99 CLR 285 General Steel Industries Inc v Commissioner for Railways (NSW) [1964] HCA 69; (1964) 112 CLR 125 Gordon v Lidcombe Developments Pty Ltd [1966] 2 NSWR 9 Myers v Catterson (1889) 43 Ch D 470 Project Blue Moon Pty Ltd v Fairway Trading Pty Ltd [2000] FCA 127 Shilkin v Homestead Furniture Nominees Pty Ltd [2011] WADC 7 Spencer v The Commonwealth of Australia [2010] HCA 28; (2010) 241 CLR 118 Trego v Hunt [1896] AC 7 Wilcox v Richardson (1997) 43 NSWLR 4 World Best Holdings Ltd v Sarker [2010] NSWCA 24 |
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA TITLE OF COURT : THE COURT OF APPEAL (WA) CITATION : SHILKIN -v- TAYLOR [2011] WASCA 255 CORAM : PULLIN JA
- BUSS JA
NEWNES JA
- Appellant
AND
COLIN HOWARD TAYLOR
JENNIFER ELLEN BAKER
First Respondents
HOMESTEAD FURNITURE NOMINEES PTY LTD
ANNE MARGARET SHILKIN
Second Respondents
ON APPEAL FROM:
Jurisdiction : DISTRICT COURT OF WESTERN AUSTRALIA
Coram : WAGER DCJ
Citation : SHILKIN -v- HOMESTEAD FURNITURE NOMINEES PTY LTD [2011] WADC 7
File No : APP 50 of 2010
(Page 2)
Catchwords:
Practice and procedure - Application by appellant to set aside default judgment - Magistrates Court (Civil Proceedings) Act 2004 (WA), s 18(2), s 19(3) - Principles to be applied - Whether defence has 'reasonable prospect of succeeding' - Admission of new evidence on appeal - Relevant principles - Magistrates Court (Civil Proceedings) Act, s 42(3)(c), s 42(4)
Real property - Lease - Default by appellant/lessee in payment of rental - Appellant contended first respondents/lessors not entitled to rely on default because caused by first respondents' conduct - Alleged that first respondents lured nearby businesses to move to new premises causing loss of custom to appellant's business and inability to pay rental - No wrongful act by first respondents alleged - No evidence first respondents caused nearby businesses to move - No derogation from grant of lease
Legislation:
Magistrates Court (Civil Proceedings) Act 2004 (WA), s 18(2), s 19(3), s 42(3)(c), s 42(4)
Result:
Appeal dismissed
Category: B
Representation:
Counsel:
Appellant : Mr J R Ludlow
First Respondents : Mr M J Hawkins
Second Respondents : No appearance
Solicitors:
Appellant : In person
First Respondents : Peel Legal
Second Respondents : No appearance
(Page 3)
Case(s) referred to in judgment(s):
Agar v Hyde [2000] HCA 41; (2000) 201 CLR 552
Aldin v Latimer Clark, Muirhead & Co [1894] 2 Ch 437
Batistatos v Roads and Traffic Authority (NSW) [2006] HCA 27; (2006) 226 CLR 256
Birmingham, Dudley & District Banking Co v Ross (1888) 38 Ch D 295
British Leyland Motor Corporation Ltd v Armstrong Patents Co Ltd [1986] AC 577
Browne v Flower [1911] 1 Ch 219
Carpet Fashion Pty Ltd v Forma Holdings Pty Ltd [2003] NSWSC 460
CDJ v VAJ [1998] HCA 67; (1998) 197 CLR 172
Dey v Victorian Railways Commissioners [1949] HCA 1; (1949) 78 CLR 62
Fancourt v Mercantile Credits Ltd [1983] HCA 25; (1983) 154 CLR 87
Field v Commissioner for Railways for New South Wales [1957] HCA 92; (1957) 99 CLR 285
General Steel Industries Inc v Commissioner for Railways (NSW) [1964] HCA 69; (1964) 112 CLR 125
Gordon v Lidcombe Developments Pty Ltd [1966] 2 NSWR 9
Myers v Catterson (1889) 43 Ch D 470
Project Blue Moon Pty Ltd v Fairway Trading Pty Ltd [2000] FCA 127
Shilkin v Homestead Furniture Nominees Pty Ltd [2011] WADC 7
Spencer v The Commonwealth of Australia [2010] HCA 28; (2010) 241 CLR 118
Trego v Hunt [1896] AC 7
Wilcox v Richardson (1997) 43 NSWLR 4
World Best Holdings Ltd v Sarker [2010] NSWCA 24
(Page 4)
1 PULLIN JA: I agree with Newnes JA.
2 BUSS JA: I agree with Newnes JA.
3 NEWNES JA: This appeal arises out of a default judgment which was entered against the appellant and two other parties in the Magistrates Court for rental and other money owing under a lease. An application to set aside the default judgment was dismissed in the Magistrates Court. In the District Court, Wager DCJ dismissed an appeal by the appellant against that decision: Shilkin v Homestead Furniture Nominees Pty Ltd [2011] WADC 7. The appellant now appeals to this court.
Background
4 On 12 July 2007, the first-named second respondent (Homestead), as lessee, entered into a lease of premises in Pinjarra with the first respondents, as lessors, for the purpose of carrying on a retail furniture business. The lease was for a term of five years, commencing on 1 July 2007, with an option to renew for a further five years. The appellant and the second-named second respondent (Ms Shilkin) guaranteed Homestead's obligations under the lease, pursuant to cl 13 of the lease.
5 Homestead proceeded to carry on a retail furniture business from the premises. The appellant says that at the commencement of the lease there was a newsagency and a butcher's shop directly opposite the furniture store premises, and a post office nearby. Sometime later (which appears to have been in about August 2009) a new shopping complex, known as the Coles centre, opened in another part of Pinjarra and the newsagency, the butcher and the post office moved to the Coles centre. The appellant says that from that time Homestead's trading figures went into a steep decline. (I should mention that it appears the appellant acknowledges that the diversion of the freeway also played some part in that decline.)
6 It appears that Homestead then fell into arrears in payment of rental and other charges under the lease. Ultimately, it decided to terminate the lease.
7 On 2 December 2009, the appellant sent an email to a representative of the first respondents, Mr Matthews. There is an issue on the appeal as to whether the email was a 'without prejudice' communication and it is therefore appropriate to set it out in full. It was as follows:
(Page 5)
- Dear Brian, I received your phone message this morning. The reason we have decided to bring the lease to an end is that we have continued to lose money.
We are not in a position to pay the arrears at the moment. We have properties we own on the market. One has sold and is due to settle mid January. It is our plan to satisfy creditors from the proceeds of these sales. The public company we own a majority of shares in and has been suspended from trading for an extended period is also due to be re listed at the end of January. In the interim we are cash flow strapped. We will be continuing to sell down our stock, including whatever is left after the vacate date. We will undertake to pay some contribution as soon as we can.
It must be said here that the opening of the Coles Complex absolutely slaughtered our business. We were not aware that all the businesses at our end of town had been enticed to close and move to the Coles centre; namely the town Newsagent directly opposite, the town butcher of 39 year standing, also directly opposite. The Hotel also closed next to us and the post office moved to the Coles Centre. It has not escaped our knowledge that our landlord is also involved in the Coles centre. Our figures went into a steep decline from the August of the opening and despite all attempts and extensive advertising and price reductions they have not recovered. The final straw is the opening of the Freeway bypassing Pinjarra and dropping passing traffic incredibly.
We do not recoil from our obligations but are cash flow strapped at the present time.
8 On or about 4 February 2010, the first respondents served default notices on Homestead, the appellant and Ms Shilkin, demanding payment within seven days of the sum of $31,431.20 owing under the lease. The money was not paid and, on 16 February 2010, the lessors commenced proceedings in the Mandurah Magistrates Court against those parties claiming the sum of $31,541.20. (The difference in the amounts is not explained in the material before us.)
9 The appellant filed a notice of an intention to defend on behalf of Homestead and on his own behalf. A notice of intention to defend was never filed by or on behalf of Ms Shilkin. Default judgment was entered against the appellant and Homestead at a pre-trial conference on 27 April 2010 and, on 15 March 2010, it was entered against Ms Shilkin.
The application to the Magistrates Court
10 The appellant applied to the Magistrates Court to set aside the default judgment against all three defendants. The evidence before the magistrate included an affidavit sworn by the appellant, dated 15 June 2010, setting
(Page 6)
- out the merits of his defence and counterclaim. In relation to the merits, the appellant said:
10. As at the commencement of the lease, there was a newsagency and a butcher's store directly opposite the furniture store premises, and a post office nearby.
11. Subsequently, in another part of Pinjarra, a company carrying on a business in which I understand at least one of the [first respondents] has a financial interest ('Coles centre company'), opened a new shopping complex known as the Coles centre.
12. On behalf of those who had a financial interest in its business, the Coles centre company lured away the newsagency business, the butcher and the post office that had previously carried on business near the furniture store premises. All three of those businesses therefore closed the shops near the furniture store premises from which they had previously been trading, and moved to the Coles centre. The Coles centre company did not attempt to lure away [Homestead] as well.
13. As from August 2009, [Homestead's] trading figures went into a steep decline coinciding with the opening of the Coles centre, and the closure of the three shops I have mentioned. I believe that these two events are more than a mere coincidence, because the combined effect on the furniture store business of the opening of the Coles centre and the closure of the three shops was to lure away many potential customers of the furniture store business. The actions of the Coles centre company as described above essentially made the furniture store business unviable.
14. The matters to which I have just referred are the main basis on which [Homestead] was and still is seeking to defend the [first respondents'] claim against it, and the main basis on which [Homestead] wished, and still wishes, to make a counterclaim. [Homestead] also alleges that the [first respondents] owe them money for fixtures agreed to be transferred to the [first respondents].
(Page 7)
12 The appellant appealed to the District Court, pursuant to s 40(1) of the Magistrates Court (Civil Proceedings) Act 2004 (WA).
The decision of the primary judge
13 The primary judge observed that there were two main issues to be determined on the appeal, first, whether the appellant had standing to have the default judgment against Ms Shilkin and Homestead set aside, and, secondly, whether there was an arguable defence to the claim.
14 On the first issue, the primary judge held that the effect of cl 13 of the lease was to make the appellant and Ms Shilkin individually liable as original debtors and to create distinct liabilities in each of the parties. The appellant did not, therefore, have standing in respect of the default judgment entered against Ms Shilkin and Homestead [18].
15 The remaining question was whether the appellant had an arguable defence to the claim. The primary judge rejected the appellant's contention that the email of 2 December 2009 was a 'without prejudice' communication. Her Honour found that the email simply set out the appellant's decision to terminate the lease and the reasons for that decision. It was not part of an attempt to seek a compromise of any dispute between the parties.
16 It was submitted on behalf of the appellant that the first respondents could not complain of Homestead's failure to make payment of rental and other moneys payable under the lease because Homestead's failure to do so had come about as a result of the first respondents' conduct in luring the adjacent businesses away to the Coles centre, thereby in turn luring away many potential customers of Homestead's business. That led to a 'steep decline' in Homestead's trading figures with the result that it was unable to meet its rental obligations under the lease. The first respondents could not, it was submitted, take advantage of the non-fulfilment of a contractual term, the performance of which they had prevented. Counsel for the appellant relied on World Best Holdings Ltd v Sarker [2010] NSWCA 24 [59] - [62] in support of that proposition.
17 The primary judge did not accept that an arguable defence had been disclosed. Her Honour held there was no evidence the first respondents had any interest in the Coles centre. Her Honour further held that even if such an interest had been shown, it would not have provided the appellant with an arguable defence. Her Honour noted that it was not contended that the first respondents had 'poached' customers of Homestead. The complaint was that they had invited other businesses near Homestead's
(Page 8)
- premises to move to the Coles centre. There was no covenant by the first respondents that unrelated businesses would remain in the vicinity of Homestead's premises and there was nothing to prevent the first respondents from offering to relocate other businesses to different premises.
18 The primary judge held that the appellant did not have a credible defence that would have a real prospect of success [33], and accordingly dismissed the appeal.
19 The appellant now appeals against her Honour's decision.
The grounds of appeal
20 The appellant relies upon the following grounds of appeal:
1. The learned primary judge erred in law and in fact in holding that the Appellant does not have standing to have the judgments against the other parties set aside, when she should have held that the Appellant does have such standing.
2. The learned primary judge erred in law and in fact in holding, in effect, that the email quoted in par 8 of her reasons for decision was not without prejudice, when she should have held that the email was without prejudice, and therefore inadmissible.
3. The learned primary judge erred in law and in fact in proceeding on the basis that she was required to decide whether a reasonable cause of action had been identified by the evidence or whether there was no real question to be tried, when:
(a) the true question was a different question, namely whether the defence the Appellant had raised had a reasonable prospect of succeeding (Magistrates Court (Civil Proceedings) Act 2004 (WA), s 18);
(b) in considering that question, the court was required to consider, inter alia, whether discovery of documents or their production upon summons or other interlocutory process might assist the Appellant to establish the facts he was asserting.
4. The learned primary judge erred in law and in fact in refusing to accept that the appellant has a credible defence that, if argued on its merits, would have a real prospect of success, when she should have held, in answer to the correct question she was required to consider (see ground 3), that the defence the Appellant has raised has a reasonable prospect of succeeding.
(Page 9)
The disposition of the appeal
21 It is convenient to go at once to the third and fourth grounds of appeal. They raise, in substance, two questions. First, whether the primary judge applied the correct test in considering the merits of the appellant's defence to the claim and, secondly, whether the primary judge should have found that the appellant's defence had a reasonable prospect of succeeding.
22 The judgment against the appellant was apparently entered pursuant to s 19 of the Magistrates Court (Civil Proceedings) Act. Section 19(2)(b) of that Act provides that where a party does not comply with (among other things) the rules of court, the court may give judgment against the party without trial. The precise nature of the default or defaults which led to judgment being entered in this case is not clear from the papers before the court but it was not in issue that the default judgments were regularly entered.
23 Section 19(3) of the Act provides that the court may set aside a judgment given under s 19(2) and may do so on conditions. It is that provision upon which the appellant sought to rely.
24 It is also necessary, however, to have regard to s 18(2) of the Act which provides:
The Court may give judgment in favour of a claim without a trial if the party defending the claim does not satisfy the Court that the defence has a reasonable prospect of succeeding.
25 The discretion of the court to set aside a default judgment under s 19(3) must be exercised judicially but it is otherwise unfettered. It is self-evident, however, that ordinarily no purpose would be served in setting aside a default judgment if the defendant is unable to satisfy the court that the defence has a reasonable prospect of succeeding, so that the plaintiff is entitled to judgment without trial under s 18(2). It follows that an important issue on an application to set aside a default judgment under s 19(3) will be whether the defendant can satisfy the court that the defence has a reasonable prospect of succeeding.
26 It is not helpful to attempt to explain what 'a reasonable prospect of succeeding' means by substituting other words. As Hayne, Crennan, Kiefel and Bell JJ pointed out in Spencer v The Commonwealth of Australia [2010] HCA 28; (2010) 241 CLR 118, in respect of a similar phrase in the Federal Court of Australia Act 1976 (Cth):
(Page 10)
- No paraphrase of the expression can be adopted as a sufficient explanation of its operation, let alone definition of its content. Nor can the expression usefully be understood by the creation of some antinomy intended to capture most or all of the cases in which it cannot be said that there is 'no reasonable prospect'. The judicial creation of a lexicon of words or phrases intended to capture the operation of a particular statutory phrase like 'no reasonable prospect' is to be avoided [58].
27 A number of different phrases have been used in similar contexts. The predecessor to the Magistrates Court (Civil Proceedings) Act, the Local Courts Act 1904 (WA), provided, by s 47A(1), that where a plaintiff had a claim for a liquidated sum and on an application for summary judgment deposed to a belief that there was no defence to the action, the court could give judgment for the plaintiff unless the defendant satisfied the court that '[the defendant] has a good defence to the action on the merits or ought for any reason to be allowed to defend'.
28 In the Supreme Court, the test is expressed differently again. Order 14 r (3) of the Rules of the Supreme Court 1971 (WA) provides that where on an application for summary judgment the plaintiff deposes to a belief there is no defence to the claim, the court may give judgment unless the defendant 'satisfies the court … that there is an issue or question in dispute which ought to be tried, or that there ought for some other reason to be a trial'. The same provision applies in the District Court: District Court Rules 2005 (WA), r 6.
29 It is unnecessary to multiply examples by reference to other jurisdictions. But it has been accepted that different terminology does not necessarily reflect a difference in substance in the test to be applied. In General Steel Industries Inc v Commissioner for Railways (NSW) [1964] HCA 69; (1964) 112 CLR 125, 129 - 130, Barwick CJ pointed out that the test for summary judgment was expressed in many different ways, in some cases relying on the inherent jurisdiction of the court and in others on rules of court, but in the end they amounted to different ways of saying that the case was so clearly untenable that it cannot possibly succeed.
30 In Fancourt v Mercantile Credits Ltd [1983] HCA 25; (1983) 154 CLR 87, the High Court said:
The power to order summary or final judgment is one that should be exercised with great care and should never be exercised unless it is clear that there is no real question to be tried (99).
31 In Agar v Hyde [2000] HCA 41; (2000) 201 CLR 552, Gaudron, McHugh, Gummow and Hayne JJ said:
(Page 11)
- Ordinarily, a party is not to be denied the opportunity to place his or her case before the court in the ordinary way, and after taking advantage of the usual interlocutory processes. The test to be applied has been expressed in various ways, but all of the verbal formulae which have been used are intended to describe a high degree of certainty about the ultimate outcome of the proceeding if it were allowed to go to trial in the ordinary way [57].
32 That passage was referred to with approval by Gleeson CJ, Gummow, Hayne and Crennan JJ in Batistatos v Roads and Traffic Authority (NSW) [2006] HCA 27; (2006) 226 CLR 256.
33 More recently, in Spencer v The Commonwealth the High Court had occasion to consider the phrase 'a reasonable prospect of success' in the context of an application for summary judgment. That case concerned s 31A of the Federal Court Act, which, so far as relevant, was in the following terms:
(2) The Court may give judgment for one party against another in relation to the whole or any part of a proceeding if:
(a) the first party is defending the proceeding or that part of the proceeding; and
(b) the Court is satisfied that the other party has no reasonable prospect of successfully prosecuting the proceeding or that part of the proceeding.
(3) For the purposes of this section, a defence or a proceeding or part of a proceeding need not be:
(a) hopeless; or
(b) bound to fail;
for it to have no reasonable prospect of success.
(4) This section does not limit any powers that the Court has apart from this section.
34 The plurality observed that there were two things to be noted about those provisions. First, the central idea around which they pivot is 'no reasonable prospect'. Their Honours noted that it differed from the equivalent English rule, where the phrase 'no real prospect' was used, observing that the phrases 'no reasonable prospect' and 'no real prospect' conveyed very different meanings. Secondly, effect must be given to subsection (3). The plurality said:
(Page 12)
- [T]he combined effect of subss (2) and (3) is that the inquiry required in this case is whether there is a 'reasonable' prospect of prosecuting the proceeding, not an inquiry directed to whether a certain and concluded determination could be made that the proceeding would necessarily fail.
In this respect, s 31A departs radically from the basis upon which earlier forms of provision permitting the entry of summary judgment have been understood and administered. Those earlier provisions were understood as requiring formation of a certain and concluded determination that a proceeding would necessarily fail [52] - [53].
35 Their Honours distinguished in that respect Dey v Victorian Railways Commissioners [1949] HCA 1; (1949) 78 CLR 62, 91 and General Steel Industries.
36 The plurality continued:
Because s 31A(3) provides that certainty of failure ('hopeless' or 'bound to fail') need not be demonstrated in order to show that a plaintiff has no reasonable prospect of prosecuting an action, it is evident that s 31A is to be understood as requiring a different inquiry from that which had to be made under earlier procedural regimes. It follows, of course, that it is dangerous to seek to elucidate the meaning of the statutory expression 'no reasonable prospect of successfully prosecuting the proceeding' by reference to what is said in those earlier cases [56].
37 Following the admonition about substituting other words for the statutory language (set out above at [26]), their Honours concluded:
In many cases where a plaintiff has no reasonable prospect of prosecuting a proceeding, the proceeding could be described (with or without the addition of intensifying epithets like 'clearly', 'manifestly' or 'obviously') as 'frivolous', 'untenable', 'groundless' or 'faulty'. But none of those expressions (alone or in combination) should be understood as providing a sufficient chart of the metes and bounds of the power given by s 31A. Nor can the content of the word 'reasonable', in the phrase 'no reasonable prospect', be sufficiently, let alone completely, illuminated by drawing some contrast with what would be a 'frivolous', 'untenable', 'groundless' or 'faulty' claim.
Rather, full weight must be given to the expression as a whole. The Federal Court may exercise power under s 31A if, and only if, satisfied that there is 'no reasonable prospect' of success. Of course, it may readily be accepted that the power to dismiss an action summarily is not to be exercised lightly. But the elucidation of what amounts to 'no reasonable prospect' can best proceed in the same way as content has been given, through a succession of decided cases, to other generally expressed statutory phrases, such as the phrase 'just and equitable' when it is used to identify a ground for winding up a company. At this point in the
(Page 13)
- development of the understanding of the expression and its application, it is sufficient, but important, to emphasise that the evident legislative purpose revealed by the text of the provision will be defeated if its application is read as confined to cases of a kind which fell within earlier, different, procedural regimes [59] - [60].
38 In a separate judgment, French CJ and Gummow J said:
The exercise of powers to summarily terminate proceedings must always be attended with caution. That is so whether such disposition is sought on the basis that the pleadings fail to disclose a reasonable cause of action or on the basis that the action is frivolous or vexatious or an abuse of process. The same applies where such a disposition is sought in a summary judgment application supported by evidence [24].
39 Having referred to the passages in Fancourt and Agar which are set out above, their Honours continued:
There would seem to be little distinction between those approaches and the requirement of a 'real' as distinct from 'fanciful' prospect of success contemplated by s 31A. That proposition, however, is not inconsistent with the proposition that the criterion in s 31A may be satisfied upon grounds wider than those contained in pre-existing Rules of Court authorising summary dispositions.
Section 31A(2) requires a practical judgment by the Federal Court as to whether the applicant has more than a 'fanciful' prospect of success [24] - [25].
40 In s 18(2) of the Magistrates Court (Civil Proceedings) Act there is no equivalent of s 31A(3) of the Federal Court Act. What, therefore, can be drawn from the decision in Spencer is limited. But two things seem clear. First, it remains the case that the power summarily to terminate proceedings must be exercised with caution. Secondly, the expression 'a reasonable prospect of succeeding', at least when unaccompanied by provisions of the nature contained in s 31A(3) of the Federal Court Act, still requires a high degree of certainty about the ultimate outcome of the proceeding if it were allowed to go to trial.
41 In the present case, I do not consider that anything turns on precisely how the statutory test is to be understood (if it is to be understood) as opposed to other verbal formulae that have been used. Although the primary judge used the test of 'real prospect of success', rather than 'a reasonable prospect of succeeding', nothing turns on that because it is clear the appellant's proposed defence did not have a reasonable prospect of succeeding.
(Page 14)
42 It is necessary to turn to the substance of the defence advanced on behalf of the appellant. That defence was summarised in the appellant's written submissions as follows:
(a) the First Respondents leased the shop to Homestead, but then lured away at least most of the Homestead's prospective customers, by enticing the proprietors of nearby complementary businesses to move to a new shopping centre in another part of town, leaving the Homestead shop out on a limb, so to speak;
(b) in the circumstances, Homestead found it difficult or impossible to earn the income it needed to earn to meet its continuing obligation to pay rent and other sums of money to the First Respondents under the lease;
(c) that being so, it follows, according to the defence the Appellant has raised, that neither Homestead nor the guarantors were liable under the Lease to pay the sums claimed, alternatively to pay all of the sums claimed.
43 As I have mentioned, the appellant relied upon the decision of the New South Wales Court of Appeal in World Best Holdings Ltd v Sarker in support of that submission. In that case, the respondent took a lease of premises in a shopping centre from the appellant, the parties entering into a written lease agreement. Shortly after the respondent took possession of the premises, a dispute arose over whether, under the terms of its lease, the respondent was entitled to sell Indian groceries and halal meats from the premises. The appellant alleged that the respondent was not entitled to do so. It served a notice of termination of the lease and locked the respondent out of the premises. The respondent regained possession after taking court proceedings. The appellant then refused to give its consent to the respondent's application to the local authority for development approval for the fit-out of the premises, until ordered to do so by the Administrative Decisions Tribunal. The appellant then refused to allow a workman access to the common area to carry out work required for the approved fit-out until again ordered by the Tribunal to do so. The appellant subsequently served a second notice of termination on the ground that the respondent was in breach of the lease in, among other things, failing to comply with its obligations to complete the fit-out of the premises. The court held that the appellant could not rely on the respondent's failure to complete the fit-out in circumstances where the appellant had obstructed that work. Handley AJA (with whom Tobias and Campbell JJA agreed) said, in a passage relied upon by the present appellant [59] - [62]:
[T]he landlord cannot complain of any breaches if he has prevented or obstructed performance by the tenant.
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- The relevant principle … is that stated by Sir Owen Dixon in Peter Turnbull & Co Pty Ltd v Mundus Trading Co (Australasia) Pty Ltd [1954] HCA 25 ; 90 CLR 235, 246:
'Now, long before the doctrine of anticipatory breach of contract was developed it was always the law that, if a contracting party prevented the fulfilment by the opposite party to the contract of a condition precedent therein expressed or implied, it was equal to performance thereof.'
This statement was cited with apparent approval in Foran v Wight[1989] HCA 51; 168 CLR 385, at 418, 445, 456. The underlying principle is that the law will not permit a party to take advantage of his own wrong: New Zealand Shipping Co Ltd v Société des Ateliers et Chantiers de France [1919] AC 1; Panamena Europa Navigacion (Compania Limitada) v Frederick Leyland & Co Ltd [1947] AC 428, 436; Suttor v Gundowda Pty Ltd [1950] HCA 35; 81 CLR 418, 440-1; Alghussein Establishment v Eton College [1988] 1 WLR 587 HL. In Roberts v Bury Improvement Commissioners (1870) LR 5 CP 310, 329 Kelly CB expressed the principle as follows:
'The rule of law applies which exonerates one of two contracting parties from the performance of a contract where the performance of it is prevented or rendered impossible by the wrongful act of the other contracting party.'
As Gaudron J said in Foran v Wight[1989] HCA 51; 168 CLR 385, 458:
'In such a case it is said that the contract continues on foot. But it continues on foot in what is, in effect, varied form. It is transformed from one requiring performance at a specified time to one requiring performance within a reasonable time.'
45 There is no substance in that submission. In the first place, it is not made out on the facts. The allegation in the appellant's affidavit is not that the first respondents 'lured' the other three businesses to transfer to the Coles centre, but rather that a company in whose business at least one of the first respondents had some (unspecified) financial interest did so. Moreover, the allegation that the other three businesses were 'lured' to transfer to the Coles centre was simply a matter of assertion by the
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- appellant rather than having any foundation in the evidence. In that regard, the appellant appeared to rely upon an inference to be drawn from the fact that upon the opening of the Coles centre, some two years after Homestead commenced trading, those three businesses moved to that centre and the allegation that at least one of the first respondents had some interest in the business of the company which owned the Coles centre.
46 There was, however, no evidence as to the circumstances in which those businesses came to move to the Coles centre and nor was there any evidence to support the assertion that at least one of the first respondents had some interest in the business of the company which owned the Coles centre.
47 In any event, even if the appellant were able to show that the first respondents induced those other businesses to move to the Coles centre, that would not provide the appellant with any defence to the claim. Nothing said in World Best assists the appellant. There the court relied upon the principle that the law will not permit a party to take advantage of his own wrong and, in particular, that where the performance of a condition of a contract by one contracting party is prevented or rendered impossible by the wrongful act of the other party, the guilty party cannot rely on the innocent party's failure to perform as a breach of the contract.
48 In the present case, there is nothing to suggest that an inducement by the first respondents to the three businesses to transfer to the Coles centre would be a wrongful act in relation to the appellant. There is nothing contained in the lease which would have that effect and, subject to what I am about to come to, counsel was unable to point to any other basis upon which such conduct on the part of the first respondents would be wrongful.
49 On the hearing of the appeal, counsel for the appellant raised (without objection by the first respondents) for the first time an argument that the alleged act of the first respondents in 'luring' the three other businesses to move to the Coles centre constituted a derogation from the grant of the lease. There was no explanation as to why it was not raised below or why it did not appear in the appellant's written submissions. In any event, I do not consider there is any substance in it.
50 In the first place, it does not overcome the singular lack of any evidence that the first respondents enticed the other businesses to move to the Coles centre or any evidence from which that might be capable of being inferred. Secondly, it is misconceived.
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51 The principle that a grantor must not derogate from the grant is one of considerable antiquity: see Birmingham, Dudley & District Banking Co v Ross (1888) 38 Ch D 295, 313. It has been described variously as a presumption of law, an implied obligation, an implied contract and an implied covenant: see Myers v Catterson (1889) 43 Ch D 470, 482 - 484 (Bowen LJ); and Project Blue Moon Pty Ltd v Fairway Trading Pty Ltd [2000] FCA 127. It has been said to arise from 'the duty … imposed on the grantor in consequence of the relation which he has taken upon himself towards the grantee': Birmingham (308); that is, 'a grantor having given a thing with one hand is not to take away the means of enjoying it with the other': Birmingham (313).
52 In Browne v Flower [1911] 1 Ch 219, Parker J described the principle as follows:
[I]f the grant or demise be made for a particular purpose, the grantor or lessor comes under an obligation not to use the land retained by him in such a way as to render the land granted or demised unfit or materially less fit for the particular purpose for which the grant or demise was made (226).
53 That passage was referred to with approval by Lord Templeman in British Leyland Motor Corporation Ltd v Armstrong Patents Co Ltd [1986] AC 577, 641 (HL). See also Aldin v Latimer Clark, Muirhead & Co [1894] 2 Ch 437, 444; Gordon v Lidcombe Developments Pty Ltd [1966] 2 NSWR 9; Wilcox v Richardson (1997) 43 NSWLR 4, 18; Carpet Fashion Pty Ltd v Forma Holdings Pty Ltd [2003] NSWSC 460 [168]; Bradbrook A, Croft C and Hay R, Commercial Tenancy Law (3rd ed, 2009) [8.5]; Butt P, Land Law (6th ed, 2010) [16.52].
54 That principle has no application to the facts of this case. There is no evidence that the first respondents had any interest in the land on which the other three businesses were respectively located before they moved to the Coles centre. It is not suggested that they were located within a shopping centre or complex which contained the premises occupied by Homestead, or that the land on which they were located had any connection with Homestead's premises. Nor is it suggested that the owners of those businesses leased their premises from the first respondents or any entity controlled by the first respondents.
55 Counsel for the appellant sought, however, to invoke the principle as it has been applied in a different context. He placed reliance on what was said by Lord Macnaghten in Trego v Hunt [1896] AC 7, 24 - 25. In that case it was held that where the goodwill of a business is sold, the vendor may set up a rival business and deal with customers of his old business if
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- they approach him, but he is not entitled to canvass the customers of his old business. The passage from the speech of Lord Macnaghten on which the appellant sought to rely is as follows:
[A] person who sells the goodwill of his business is under no obligation to retire from the field. Trade he undoubtedly may, and in the very same line of business. If he has not bound himself by special stipulation, and if there is no evidence of the understanding of the parties beyond that which is to be found in all cases, he is free to carry on business wherever he chooses. … He may do everything that a stranger to the business, in ordinary course, would be in a position to do … He may thus interfere with the custom of his neighbour as a stranger and an outsider might do; but he must not, I think, avail himself of his special knowledge of the old customers to regain, without consideration, that which he has parted with for value. … He may not sell the custom and steal away the customers in that fashion.
…
The principle … has been presented in various ways. A man may not derogate from his own grant; the vendor is not at liberty to destroy or depreciate the thing which he has sold; there is an implied covenant, on the sale of goodwill, that the vendor does not solicit the custom which he has parted with: it would be a fraud on the contract to do so. These, as it seems to me, are only different turns and glimpses of a proposition which I take to be elementary. It is not right to profess and to purport to sell that which you do not mean the purchaser to have; it is not an honest thing to pocket the price and then to recapture the subject of sale, to decoy it away or call it back before the purchaser has had time to attach it to himself and make it his very own (24 - 25).
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- Coles centre, they were doing no more than 'a stranger and an outsider might do'.
57 The appellant's contention that there was a reasonable prospect of establishing a derogation from the grant must be rejected.
58 I would add that there is no reason to believe that interlocutory processes such as discovery and inspection might assist the appellant's case. Counsel for the appellant could not suggest any basis for supposing that they might. Those processes do not, of course, exist to enable a defendant simply to rummage around in the other side's documents in the hope that something by way of a defence might turn up.
59 It follows that the primary judge was right to dismiss the appeal from the magistrate's decision. The appellant had no reasonable prospect of succeeding in defending the claim.
60 In light of that conclusion, it is unnecessary to consider the question of whether the appellant had standing to apply to set aside the default judgment against Homestead and Ms Shilkin respectively. It follows from what I have said that neither Homestead nor Ms Shilkin has a defence to the claim and any application to set aside the default judgments against them must fail.
61 It is also unnecessary to consider whether the email of 2 December 2009 contained a privileged communication, as the contents of the email are entirely unnecessary to the first respondents' claim. But I would say in passing that it seems to me, with respect, that the primary judge was plainly correct in finding that it was not privileged. The privilege attaching to a 'without prejudice' communication exists as a matter of policy to exclude from being put into evidence admissions and other statements relating to the strength or weakness of a party's case which are made in the course of negotiations to compromise litigation: see Cross On Evidence (8th Aust ed, 2010) [25350]; Field v Commissioner for Railways for New South Wales [1957] HCA 92; (1957) 99 CLR 285, 291. As the High Court pointed out in Field (291), the purpose is to enable parties engaged in an attempt to compromise litigation to communicate with one another freely and without the embarrassment which the liability of their communications to be put in evidence subsequently might impose upon them.
62 In this case, on the face of the email of 2 December 2009 the communication was not for the purpose of negotiations to resolve a dispute between the parties. There is no evidence to suggest that it was
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- other than it appears. I do not accept the submission of counsel for the appellant that it can be inferred from the reference in the email to a telephone message the previous day from the first respondents' representative, Mr Matthews, that the email was sent in the course of negotiations to compromise the first respondents' claim. There was no evidence as to the content or circumstances of Mr Matthews' telephone message and no such inference can be drawn. There is no foundation to the claim that the email was a 'without prejudice' communication.
63 For the sake of completeness, I should also mention the applications by the first respondents to strike out ground three of the grounds of appeal (that application having been referred to the hearing of the appeal) and to have additional evidence admitted on the appeal, and the application by the appellant to have additional evidence admitted.
64 The first respondents did not press their application to have additional evidence admitted and, in light of the decision I have reached on the appeal, it is unnecessary to consider the first respondents' strike out application. That application falls away.
65 That leaves the appellant's application, which was made orally on the hearing of the appeal. The appellant's counsel sought to have admitted as additional evidence an affidavit of the appellant sworn on 8 June 2011 and (so counsel insisted) two affidavits which the first respondents had filed in support of the strike out application. The latter were an affidavit of the first-named first respondent (Mr Taylor) and an affidavit of a solicitor, Mr Bassett-Scarfe.
66 The appellant's affidavit of 8 June 2011 attaches a number of newspaper articles relating to the opening of the Coles centre in order to demonstrate that the first respondents have some familial connection with the owner of the Coles centre. Thus, for instance, one of the articles states that the owner of the Coles centre is a member of the Taylor family. Another says that the first respondents' son-in-law owns the Coles centre. It is evident that so far as the material in that affidavit is sought by the appellant to be admitted on the appeal, it is in the nature of new evidence, rather than fresh evidence; that is, it is evidence which, with the exercise of reasonable diligence, could have been discovered by the appellant prior to the hearing before the magistrate of the application to set aside the default judgment.
67 A heavy onus lies on an appellant who seeks to have new evidence admitted on appeal. It will normally be incumbent upon the appellant to
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- provide an explanation as to why the evidence was not led at first instance. Where the evidence was deliberately withheld, that will be a factor which weighs heavily against the admission of the evidence on appeal: CDJ v VAJ [1998] HCA 67; (1998) 197 CLR 172 [116]. Even where that is not the case, ordinarily the court will refuse to admit new evidence on appeal unless the court is satisfied that the new evidence would have led to a different outcome if it had been led below. That is because unless that condition is satisfied it will seldom, if ever, be in the interests of justice to deprive the respondent of the orders made below and to put that person to the expense, inconvenience and worry of a new trial (or in this case, of a full trial): see CDJ v VAJ [111].
68 On an appeal of the present kind, this court may give leave for additional evidence to be admitted only in exceptional circumstances: Magistrates Court (Civil Proceedings) Act, s 42(3)(c), s 42(4). It is not helpful to attempt to describe what would constitute 'exceptional circumstances' for the purpose of s 42(3)(c). The variety of circumstances that might arise is inexhaustible and restating the statutory test in different words would serve no useful purpose. It is sufficient to say that in this case no exceptional circumstances have been made out. The appellant has provided no explanation as to why the evidence referred to in his affidavit was not led before the magistrate and the evidence itself goes only to the question of whether the first respondents had an interest in the company which owned the Coles centre. For the reasons I have given above, that is irrelevant to the outcome of the proceedings.
69 The remaining evidence sought to be admitted was contained in the affidavits of Mr Taylor and Mr Bassett-Scarfe. In his affidavit, Mr Taylor says that he and his wife were the sole shareholders and directors of a company which was the owner of part of the land on which the Coles centre is now constructed. He says the land was sold in March 2007 to a company in which he and his wife have no interest. The Coles centre was constructed after the purchaser had amalgamated the land with other land owned by the purchaser. Mr Taylor also says that he has never persuaded or induced anyone to relocate to the Coles centre. Mr Bassett-Scarfe's affidavit attaches title and company searches verifying the sale of the land.
70 So far as those affidavits are concerned, I do not understand why the appellant seeks to rely upon them. There is nothing contained in the affidavits which would advance the appellant's case. In any event, no exceptional circumstances have been established to enable them to be admitted as additional evidence.
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71 The application for leave to admit additional evidence must be refused.
Conclusion
72 The appeal should be dismissed.
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