Sonnet Holdings Pty Ltd v Dunn - [2012] WADC 11

JURISDICTION : DISTRICT COURT OF WESTERN AUSTRALIA
IN CHAMBERS

LOCATION: PERTH

CITATION: SONNET HOLDINGS PTY LTD -v- DUNN [2012] WADC 11

CORAM: STAVRIANOU DCJ

HEARD: 16 DECEMBER 2011

DELIVERED : 25 JANUARY 2012

FILE NO/S: CIV 2245 of 2009

BETWEEN: SONNET HOLDINGS PTY LTD
Plaintiff
AND
BRIAN MAURICE DUNN
Defendant

Catchwords:

Practice and procedure - Consent order not attested as required by O 42 r 8 - Consent judgment entered - Application to set aside consent judgment - Whether judgment was a nullity or an irregularity - Whether order should be made under O 2 r 1(2) to deal with the irregularity

Legislation:

Rules of the Supreme Court 1971 (WA) O 2 r 1, O 2 r 2, O 42 r 8

Result:

Judgment set aside

Representation:

Counsel:

Plaintiff: Mr T J Palmer
Defendant: Mr K Savas

Solicitors:

Plaintiff: Patti Chong & Co
Defendant: Corser & Corser

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

Bailey v Marinof (1971) 125 CLR 529
Duncan v Lowenthal [1969] VR 180
Metroinvest Ansalt v Commercial Union Assurance Co Ltd [1984] 1 WLR 513
Murcia & Associates (a firm) v Grey [2001] WASCA 240; (2001) 25 WAR 209
Pilbara Infrastructure v Pty Ltd v BGC Contracting Pty Ltd [2007] WASCA 257; (2007) 35 WAR 412
R v S [2009] WASCA 11
The Owners of Riviera Apartments v Wembley Lakes Estate Pty Ltd [2009] WASC 37

STAVRIANOU DCJ:

The applications and the result

1.This is an application by the plaintiff, Sonnet Holdings Pty Ltd, for an order for the appointment of a receiver pursuant to s 96(1)(b) of the Civil Judgments Enforcement Act 2004. The appointment is sought in aid of execution of a consent judgment entered on 28 August 2009. There is also an application by the defendant, Brian Maurice Dunn, to set aside the judgment.
2.I have decided the application for appointment of a receiver should be dismissed. The application to set aside the judgment should be granted.

Background to the applications

On 30 July 2009 Sonnet filed the writ of summons. The statement of claim pleads that in the course of his employment by Sonnet Mr Dunn drew 41 cheques on its account in his favour, forged signatures on the cheques and as a result obtained $264,548.58 being the sum claimed.
The writ of summons was served on Mr Dunn in August 2009. Shortly thereafter he telephoned and spoke to Mr Lewis Chiat, the solicitor then acting for Sonnet.
Mr Dunn in an affidavit sworn 20 November 2011 describes the circumstances as follows:
5.During the mentioned telephone call Mr Chiat said words to the effect that I was doing the right thing by calling him and that together could solve the problem of the summons.
6.During the mentioned telephone call I told Mr Chiat that I had a claim against his client and was owed a lot of money, but that I did not want legal proceedings because I was going away to Africa for work and preferred if we came to a commercial settlement.
7.During the mentioned telephone call I also told Mr Chiat discussion with the solicitor I said words to the effect 'what do I do from here? All I want to do is sort it out, how can we enter into a commercial agreement?'
8.Mr Chiat responded by advising me that I should obtain a consent Judgment form from the District Court as the only good way to resolve this matter. I recall Mr Chiat using the words or words to the effect of 'All you need to do is get consent to Judgment from the District Court'.
9.I was pleased that Mr Chiat had found a way to resolve my legal problem of the summons but was still concerned about the time deadline on the summons so I asked Mr Chiat about that matter by saying words to the effect that 'There is a deadline of 7 days on the summons, I guess that means I have to do something in 7 days, how do I deal with that, and what do I do?'
10.In reply Mr Chiat advised me that all I needed to do was fill out the consent order the sooner the better.
11.At no stage during the telephone discussion did Mr Chiat advise me that I could file a notice of appearance to meet the 7 day deadline for responding to the writ of summons.
12.At no stage during the telephone discussion did Mr Chiat advise me that I should seek legal advice from my own solicitor or explain what the consequences of consenting to judgment were.
13.In reliance of Mr Chiats legal advice to me I believed that I was required to prepare and sign a consent to judgement in this matter as the only prudent course of action.
14.In reliance of Mr Chiats legal advice to me I believed that after the consent to judgement was filed at the Court I would be able to negotiate with the Judgement Creditor a commercial agreement having regard to the monies owed to me by the Judgement Creditor.
15.In reliance of Mr Chiats legal advice to me, and in accordance with that advice I immediately went to the District Court of Western Australia and asked the registry staff to provide me with a consent order. I cannot now recall who at the District Court Registry I spoke to.
16.A staff member at the Registry of the District Court in Perth, whose name or details I cannot now recall, provided me with an example consent order which I used to draft the consent order that was filed in this matter.
17.I drafted the consent order on my home computer copying the form of the example I obtained from the Court and copied the name of law firm and contact details from the summons. I then signed the consent order and scanned and emailed that document to Irdi Legal.
18.I have since been shown a copy of an executed consent order dated 26 August 2009 which bears my signature and the signature of Irdi Legal and recognise it as the document drafted and signed by me. I therefore believe that this is a true and correct copy of the consent order sent by me to Irdi Legal that has subsequently been signed by Irdi Legal. Attached hereto and marked with the letters 'BMD-1' is a copy of that document.
19.Shortly after emailing the signed consent order to Irdi Legal I attempted to contact Mr Chiat by telephone, but was unsuccessful.
20.Approximately one month after attempting to contact Mr Chiat by telephone I decided to contact a solicitor in relation to the writ of summons and the consent order, and I saw Mr Kerry Savas from Corser & Corser.
21.I instructed my solicitor to commence settlement negotiations with the Judgement Creditor which would include the monies owed to me by the Judgement Creditor. At this time Mr Chiat was not interested in any negotiations with me or my solicitor.
22.My solicitor told me he had been informally advised by Bankwest that it had dealings with the Judgement Creditor regarding compensation but could not disclose those details to us.
There was no affidavit in reply filed on behalf of Sonnet in relation to the circumstances.
On 28 August 2009 judgment was entered pursuant to the consent order.
On 30 September 2009 Mr Dunn's solicitors wrote to Sonnet's solicitors and referred to admissions having been made 'without the benefit of true consideration and legal advice in total reliance of a misplaced expectation that by doing so the monetary dispute between our respective clients could be resolved amicably'. After referring to a potential claim against BankWest by Sonnet a request was made for 'an urgent informal conference'. A negotiated settlement with Mr Dunn was described as the simplest and quickest financial resolution of the matter.
On 30 September 2009 Sonnet's solicitors wrote to Mr Dunn's solicitors advising that their client would not consider any settlement unless it included immediate repayment of a substantial proportion of the sum of $264,548.58.
On 11 November 2009 the solicitor for Mr Dunn sent an email to the solicitor for Sonnet in the following terms:
Dear Lewis,
Please advise of your client's decision with respect to settlement in terms of the draft deed.
Please also advise if your client has received or is in the process of receiving the settlement from BankWest. Our client states that your client has settled with BankWest and in those circumstances the necessary arrangements to terminate the judgement for the above matter ought to be made without delay.
Regards,
Kerry Savas.
On 11 November 2009 the solicitor for Sonnet responded by email as follows:
Dear Kerry,
My client is in Europe and given the time difference I'm unlikely to receive instructions until later this afternoon.
I've told you previously that BankWest has an interest in this matter. My client is under no obligation to, and will not, disclose to your client the details of any agreement or understanding between it and BankWest.
On what basis do you contend the consent judgement between your client and mine ought to be terminated?
Regards, Lewis Chiat.
On 7 April 2011 Sonnet filed an application to enforce the judgment pursuant to the Civil Judgments Enforcement Act 2004. On 12 May 2011 a means inquiry listed pursuant to the application was adjourned.
On 16 June 2011 the means inquiry proceeded and an order was made for repayment of the judgment by instalments of $400 per month. At the hearing counsel for Mr Dunn foreshadowed an application to set aside the judgment.
On 26 August 2011 Sonnet made an application for the appointment of a receiver.
On 26 September 2011 Sonnet's application for the appointment of a receiver came before the court. Again Mr Dunn's counsel foreshadowed an application to set aside the judgment. The hearing was accordingly adjourned to enable the application to be made.
On 2 November 2011 the solicitor for Mr Dunn wrote to the solicitor for Sonnet seeking confirmation as to any payment made by BankWest to Sonnet.
On 2 November 2011 the solicitor for Sonnet replied by letter asserting that Sonnet was entitled to sue Mr Dunn and to seek to enforce the judgment.
No evidence was put before the court as to what occurred between 11 November 2009 and 7 April 2011.

The consent and the judgment

The consent order dated 26 August 2009 is in the following terms:
The parties to this action consent to the following orders being made pursuant to O 43 Rule 16 of the Rules of the Supreme Court 1971(Rules):
1.There be Judgement for the Plaintiff against the defendant in the sum of $264,548.58, plus interest on the said amount from the date of each cheque to the date of payment, plus costs.
Irdi Legal Brian Dunn
Solicitor for the Plaintiff The Defendant
Order0 42 r 8 reads:
8.Entering judgment by consent where defendant has not appeared or is self‑represented
Where the defendant has not appeared or has appeared in person, no such order shall be made unless the defendant attends before a judge and gives his consent in person, or unless his written consent is attested by a solicitor acting on his behalf, except in cases where the defendant is a barrister, or solicitor.
Mr Dunn had not entered an appearance to the writ of summons and had not appeared in person when he signed the consent order. The consent order was signed by Sonnet's solicitors. Mr Dunn's signature was not attested by a solicitor then acting on his behalf. There was non‑compliance with O 42 r 8. In the circumstances before the judgment can be enforced an order is required regularising the irregularity. An irregularity should be rectified so long as it can be done without injustice: Pilbara Infrastructure v Pty Ltd v BGC Contracting Pty Ltd [2007] WASCA 257; (2007) 35 WAR 412 [52].
The failure to comply with O 42 r 8 is in this case a serious irregularity. There is non‑compliance with the express requirements of the order. The seriousness of the irregularity is further highlighted by the circumstances as outlined by Mr Dunn in his affidavit as to his discussion with Sonnet's then solicitor. The solicitor would clearly have been aware that Mr Dunn was unrepresented. The quantum of the claim was significant. Mr Dunn's evidence was that he wanted to enter into a commercial arrangement with Sonnet and that he told Mr Chiat that he had a claim against his client. It is his evidence he believed he would be able to negotiate a commercial agreement 'after the consent judgment'. It is the case, as Sonnet has submitted, that Mr Dunn has not condescended to particulars of his proposed defence to the action. Two issues have arisen in submissions in relation to Mr Dunn's defence to the action. First, there is reference to a counterclaim. There are no particulars. Secondly, it appears that part of the judgment has been satisfied by BankWest. The circumstances in which the payment was made were not fully identified.
Sonnet has also submitted that any hearing pursuant to O 42 r 8 before a judge would have been a mere formality. I do not accept that submission. Mr Dunn made clear in his affidavit that he at the least considered he could negotiate after executing the consent order. That was not the effect of the document he signed. The failure to comply in my view is so serious that the irregularity should not be remedied. The application for the appointment of a receiver accordingly should be dismissed.

The application to set aside judgment

Mr Dunn's application to set aside judgment was filed on 10 November 2011. In written submissions filed subsequent to the hearing Sonnet submitted the application was irregular in that it failed to state the grounds of the application as required by O 2 r 2(2) of the Rules. I accept the form of the application is irregular. No grounds are expressed as required. However the written submissions make clear that reliance is placed upon O 42 r 8 of the Rules. There is no demonstrated prejudice and I would allow the application to proceed notwithstanding the irregularity.
Sonnet submits that the court lacks power to set aside the consent order. Because the order has been entered into the record and perfected there is no jurisdiction to set aside the judgment. There was, it is submitted, no inherent jurisdiction which would allow the court to recall a perfected order. Reliance is placed upon the decision of the High Court of Australia in Bailey v Marinof (1971) 125 CLR 529. I do not accept the submission. The general principle that perfected orders must generally be varied by appeal is subject to a number of exceptions including where there is a specific statutory power to vary. Order 2 r 2 is such a specific provisions (Seaman PL, Civil Procedure Western Australia [43.3.5]). In this case the application by Mr Dunn to set aside the judgment is made pursuant to the express power contained in O2.
In Murcia & Associates (a firm) v Grey & Ors [2001] WASCA 240; (2001) 25 WAR 209 the jurisdiction of the District Court was considered in the context of the power to injunct a firm of solicitors from acting in a matter in circumstances where there was a conflict of interest. Steytler J (Wallwork J agreeing) considered that the District Court did not have the same supervisory or disciplinary jurisdiction over legal practitioners as possessed by the Supreme Court. However his Honour did note that the District Court did have incidental powers which are necessary for the exercise of the jurisdiction conferred upon it. Those powers were sufficient, at least, to enable it to correct irregularities in, and frauds upon, its own procedure and rules and to prevent abuses of its process. His Honour referred to and relied upon Duncan v Lowenthal [1969] VR 180, 182, where the incidental power of the County Court of Victoria was described in the following way:
There is authority that the grant of jurisdiction to hear and determine actions of the kind specified in a statute in itself carries with it the grant of such incidental powers as are necessary for the exercise of the jurisdiction and to prevent abuses of process. In Mason v Ryan [1884] VicLawRp 115; (1884) 10 VLR (L) 335, in determining that the County Court had power to set aside a void judgment, Higginbotham CJ (with whom Williams and Holroyd JJ, agreed), said at p 340:
'But I think that the Court, although (having a limited jurisdiction only) it has no jurisdiction beyond what the Legislature has given it, Rorke v Errington [1859] EngR 917; (1859) 7 HL Cas 617, still has an inherent power to prevent the abuse of and to correct irregularities in and frauds upon its own procedure and rules, and for that purpose to set aside proceedings which it may find to be void or irregular'.
Order 2 reads:
1.Non‑compliance with rules
(1)Where in beginning or purporting to begin any proceedings or at any stage in the course of or in connection with any proceedings, there has, by reason of anything done or left undone, been a failure to comply with the requirements of these rules, whether in respect of time, place, manner, form or content or in any other respect, the failure shall be treated as an irregularity and shall not nullify the proceedings, any step taken in the proceedings, or any document, judgment or O therein.
(2)Subject to subrule (3) the Court may, on the ground that there has been such a failure as is mentioned in subrule (1), and on such terms as to costs or otherwise as it thinks just, set aside either wholly or in part the proceedings in which the failure occurred, any step taken in those proceedings, or any document, judgment or O therein or exercise its powers under these rules to allow such amendments (if any) to be made and to make such O (if any) dealing with the proceedings generally as it thinks fit.
(3)The Court shall not wholly set aside any proceedings or the writ or other originating process by which they were begun on the ground that the proceedings were required by any of these rules to be begun by an originating process other than the one employed.
2.Application to set aside for irregularity
(1)An application to set aside for irregularity any proceedings, any step taken in any proceedings or any document, judgment or O therein shall not be allowed unless it is made within a reasonable time and before the party applying has taken any fresh step after becoming aware of the irregularity.
(2)An application under this rule shall be made by summons or motion, as the case may require, and the grounds of objection must be stated in the summons or notice of motion.
Sonnet relies upon O 2 r 2 and submits that the application to set aside the judgment made by Mr Dunn has not been made within a reasonable time and therefore should not be allowed.
The English equivalent of O 2 and the consequences of an irregularity were considered in Metroinvest Ansalt v Commercial Union Assurance Co Ltd [1984] 1 WLR 513. In that case the plaintiffs sought to accept money paid into court by the defendant. The notice of acceptance was not in the prescribed form. The plaintiffs' failure was construed as an irregularity which continued until and unless the court exercised its powers under the English equivalent of O 2 r 1(2). Cumming‑Bruce LJ considered that from the moment a step in proceedings is tainted by irregularity through failure to comply with the rules, the irregular step or document remains irregular inter partes until the matter has been brought before the court and the court has decided in which way to exercise the jurisdiction conferred by O 2 r 1(2). He considered that O 2 r 2 does not restrict the power of the court in the sense of restricting its jurisdiction, and does not have the effect of suspending the irregularity until the application under O 2 r 2 is made.
Slade LJ in explaining the position said (522):
Where, in the course of proceedings, the court finds that a failure of the nature referred to O 2 r 1(1) has occurred, which has not been waived by the other party either expressly or by implication, it is given by O 2 r 1(2) a choice of courses to pursue at its own discretion, whether or not an application under O 2 r 2 is before it. In such a situation, in the exercise of its discretion under r 1(2), it may either adopt the more draconian course of setting aside wholly or in part the proceedings in which the failure occurred, or ... make a dispensing order waiving the relevant irregularity. ... the plaintiffs ... would plainly have required a dispensation under O 2 r 1(2) before they could have relied upon the notice of acceptance so as to demand payment from the proper officer of the court as of right.

If Metroinvest is accepted to be correct and followed then the judgment is irregular and should be set aside without consideration of the merits (see The Owners of Riviera Apartments v Wembley Lakes Estate Pty Ltd [2009] WASC 37 [17]).
In Pilbara Infrastructure Pty Ltd the plaintiff entered default judgment in circumstances where the defendant had filed a memorandum of appearance with the wrong action number indorsed. The appeal concerned a judgment dismissing an application by the defendant to set aside the judgment which had been entered in default of appearance.
In the appeal the court examined English and Australian authorities in relation to the equivalent of O 2 and noted:
There is Australian authority suggesting that O 2 r 1(1) has the effect that a first reading might suggest. That is, that by operation of the rule and without any order of the court, the irregularity shall not nullify the proceedings or any step taken in the proceedings, or any document therein. See Perez v Transfield (Qld) Pty Ltd [1979] Qd R 444 which was applied in Kanyilmaz v Nominal Defendant (Qld) [2000] QSC 180 and Bates v Queensland Newspapers Pty Ltd [2001] QSC 083 See also Bill Discount Services Pty Ltd (In liq) v Dill-Macky (Unreported; WASC; Library No 6700; 7 May 1987) per Brinsden J at 6. See also the discussion in Chernov J's reasons in ANZ Banking Group Ltd v Kostovski (Unreported; SCt of Vic; 5511/97; 2 July 1997). However, in England in the Metroinvest case, Cumming-Bruce LJ said at 520:
'As I construe O 2 rule 1, from the moment a step in proceedings is tainted by irregularity through failure to comply with the rules, the irregular step or document remains irregular inter partes until the matter has been brought before the court and the court has decided in which way to exercise the jurisdiction conferred by O 2 rule 1(2)'.
In Monteleone v The Owners of the Old Soap Factory [2007] WASCA 79 [25] – [34], McLure JA discussed the effect of O 2 and said in particular at [27] that:
'On one reading of O 2 it might be thought that because an irregularity does not nullify the proceedings or any step in the proceedings, an irregular step is valid unless and until the 'innocent' party obtains an O under O 2 r 2'.
McLure JA however noticed the existence of the decision in Metroinvest but did not consider the point further because the parties in that case had not challenged the correctness of Metroinvest. Her Honour also noticed the case of Brealey v Board of Management Royal Perth Hospital [1999] WASCA 158; (1999) 21 WAR 79 where the Full Court proceeded on the assumption that Cumming‑Bruce LJ's view about O 2 r 1 was correct (but without any discussion about the correctness of the decision on that point).
In an appropriate case, it may be necessary to decide whether Metroinvest is correct. It is not necessary or desirable to consider whether the assumption made by the Full Court in Brealey was a correct assumption, or whether the reasoning in the Australian authorities referred to above should be accepted in preference to the reasoning of their Lordships in Metroinvest. It is not necessary or desirable to resolve the point because there may be other more extreme instances of irregularities which require close consideration of all these authorities, and because, even if Metroinvest is correct, this is such a plain case for the exercise of the court's powers (including the power of amendment) referred to in O 2 r 1(2), for the following reasons.
The court may exercise the discretionary powers conferred by O 2 r 1(2) of its own motion (see Slade LJ in Metroinvest, 522). Like all judicial discretions unconfined by any express conditions, the discretion should be exercised judicially and, adopting the language of Lord Denning in Harkness, any irregularity should be rectified so long as it can be done without injustice.
The decision of the Court of Appeal in Pilbara Infrastructure confirmed that O 2 r 1 did away with the old distinction between nullities and irregularities: R v S [2009] WASCA 11 (15 January 2009).
Sonnet's written submissions included:
12.Whether or not O 2 Rule 1 of the RSC has the effect that without any order of the Court an irregularity will not nullify the proceedings or any step in the proceedings unless and until the 'innocent' party applies pursuant to O 2 Rule 1 of the RSC, is a point of legal controversy in this state (Pilbara Infrastructure Pty Ltd v BGC Contracting Pty Ltd (2007) 53 WAR 412 at 425 to 427 [47] to [51] and The Owners of Riviera Apartments v Wembley Lakes Estate Pty Ltd [2009] WASC 37 at [12] to [18]).
13.In the Judgment Debtor's submission, the correct approach is that set out by Master Sanderson in The Owners of Riviera Apartments v Wembley Lakes Estate Pty Ltd [2009] WASCA 37 at [18], namely, the first question to enliven jurisdiction is to ask whether the application had been made within a reasonable time.
In my view as the learned master noted in the Owners of Riviera Apartments there is Full Court approval for the decision in Metroinvest. However, he did note that based upon the reasons in Pilbara Infrastructure there might be doubt as to whether Metroinvest would be followed. Ultimately it becomes unnecessary to determine that particular issue.
I am satisfied in this case that notwithstanding the delay the application made by Mr Dunn was made within a reasonable time as required by O 2 r 2(1). What is a reasonable time necessarily depends upon all the circumstances. The judgment was entered on 28 August 2009. In their letter of 30 September 2009 Mr Dunn's solicitors referred to the making of admissions and the consent to judgment having been provided without the benefit of legal advice. There is no evidence of any step taken by Sonnet to enforce the judgment until 7 April 2011 when an application was filed. When that application was before the court on 16 June 2011 the application to set aside the judgment was foreshadowed.
There has been no explanation by Sonnet as to the reason for the delay in seeking to enforce the judgment. There has been no affidavit from Mr Chiat as to the circumstances. I am satisfied in all the circumstances that Mr Dunn's application has been made within a reasonable time.

Conclusion

I am not satisfied in the circumstances that it would be just to regularise the judgment. The judgment is irregular and must be set aside.